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Jan-06-2018 18:21printcomments

Congress, Hands Off Social Security

Many senior citizens rely only on Social Security benefits to survive.

hands off
Salem-News.com

(SAN FRANCISCO, Calif.) - Both my wife and I receive Social Security benefits. Yes, we are of that certain age. We pay taxes on part of our benefits.

Luckily, we do not depend on these benefits to totally meet our daily retirement living expenses. Instead they supplement our employment retirement income. Many senior citizens, however, rely only on Social Security benefits to survive.

About 169 million Americans pay Social Security taxes and we and 61 million others -- one family in four -- collect monthly benefits.

The recipients are retirees, disabled persons, and families of retired, disabled or deceased workers. The maximum Social Security benefit for a worker retiring at the 2017 full retirement age is $2,687 a month.

What is Social Security?

"Social Security is largely a pay-as-you-go program. This means that today's workers pay Social Security taxes into the program and money flows back out as monthly income to beneficiaries. As a pay-as-you-go system, Social Security differs from company pensions, which are “pre-funded.”

In pre-funded retirement programs, the money is accumulated in advance so that it will be available to be paid out to today's workers when they retire. The private plans need to be funded in advance to protect employees in case the company enters bankruptcy or goes out of business."

In short, Social Security is an earned benefit. It is also an entitlement in the sense that when you actually file a claim for benefits and get approved, you are legally entitled to those benefits. Unfortunately, some Republicans in Congress have begun to use the word "entitlement" to imply some kind of government handout that can be just taken away.

Tax Overhaul Estimated Net Deficits

Experts estimate that the recent GOP tax overhaul will result in about $1.45 trillion in net deficits over a decade. Traditionally, deficits have been anathema to republicans.

Remember when Paul Ryan warned of the dangers of deficits, “The facts are very, very clear: The United States is heading toward a debt crisis. We face a crushing burden of debt which will take down our economy — which will lower our living standards.”

During his presidential campaign, Trump said he would pay off the national debt in eight years. To close the deficit caused by the tax overhaul, the Republicans are talking about cuts to safety nets such as Social Security.

Rep. Sam Johnson (R-Tex.) introduced a plan to "modernize social security for the Twenty First century."

The LA Times described Johnson's plan, "The bottom line is that Johnson’s plan is one of the most cynical and dishonest Social Security “fixes” to come down the Republican chute in years.

"It “fixes” Social Security in the same sense that one “fixes” a cat, and makes the program less relevant for millions of Americans facing retirement with ever shrinking resources."

Is Social Security Going Broke?

While the Social Security system is in need of another overhaul (similar to the one in 1983), the fund is not going broke.

The 2017 Social Security and Medicare Board of Trustees, who oversee the fund showed that, if left alone, the Social Security system will continue to be able to pay its bills for at least the next 40 years — thanks in part to a $1.4 trillion nest egg of Treasury securities that has been stashed away over the past several decades. (A separate analysis by the Congressional Budget Office found the fund is in good shape until 2052.)

Does Congress Raid the Social Security Trust Fund?

Of course. Should we be worried? No. More Social Security taxes are collected than paid out. This buildup of surplus was intentional -- the government wanted to build a reserve that would cover the benefits of the baby boomers.

This surplus has been invested in special U.S. government bonds that are legally obligated to pay the stated rate of interest, and then repay the principal when they mature, according to the terms of the bonds. These special bonds are just part of the funding of the overall federal government, and the assets in the Social Security trust fund represent about 15% of the government's total debt.

With the special U.S. government bonds held by the Social Security trust fund, we should be concerned whether future taxpayers can make good on the interest and principal payments when they come due, or if future bonds can be sold to pay the principal of the maturing bonds. The real issue is the federal debt.

If it gets too big, then we might indeed be justified in worrying about the ability of future taxpayers to make good on the special bonds in the Social Security trust fund.

Conclusion

As Nancy Altman, co-founder of Social Security Works, put it, in the last election “no one voted for massive cuts to Social Security, nor to end the program as we know it.”

In December, 2015, just ahead of the Iowa caucuses, then-candidate Donald Trump stood up at a town hall and reassured a concerned AARP Iowa member that they "were not taking their Social Security." Perhaps, Trump should tweet Congress, telling them to take their "hands off" Social Security.

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